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Philadelphia Indemnity Insurance Co. v. We Pebble Point, LLC

United States District Court, S.D. Indiana, Indianapolis Division

November 18, 2016

WE PEBBLE POINT, LLC, Defendant/Counterclaimant.



         This cause is before the Court on Plaintiff Philadelphia Indemnity Insurance Company's (“Philadelphia Ins.”) Objection [Docket No. 58] to the Magistrate Judge's Report and Recommendation (“R&R”) [Docket No. 55]. For the reasons detailed below we OVERRULE the Objection and ADOPT the R&R.


         The facts of this case, which we summarize below, are undisputed by the parties.

         Defendant Pebble Point, LLC (“Pebble Point”) owns an apartment complex in Indianapolis, Indiana. During the relevant time period, Philadelphia Ins. issued Pebble Point two materially identical insurance policies covering certain losses at that apartment complex. In December 2012, Pebble Point made a claim against the Policy for damages to the apartment buildings which it alleged had been caused by an October 2012 storm. It then made a second, similar claim for a later storm.[1]

         After investigation, Philadelphia Ins. determined that the majority of losses claimed by Pebble Point were caused not by the storm, in which case they would have been covered, but rather by causes such as improper installation or maintenance of roofing shingles, other constructions defects, and wear and tear, none of which is covered by the Policy. As a result, Philadelphia Ins. paid Pebble Point $6, 288.56-an amount equal to the damages it found to have been caused by a covered event, minus Pebble Point's $10, 000 deductible. Pebble Point challenged Philadelphia Ins.'s conclusion, maintaining that its covered losses ranged in the hundreds of thousands of dollars, and it demanded that Philadelphia Ins. participate in an appraisal proceeding as outlined in the Policy.

         Philadelphia Ins. declined to initiate the appraisal process, contending that the parties' dispute concerned the extent to which the claimed losses were covered by the Policy, rather than the “amount of loss” claimed. It then brought this suit seeking a declaratory judgment that it had fully satisfied its obligation under the Policy. Pebble Point filed a motion to dismiss the Complaint on grounds that it was entitled to enforce the appraisal provision of the Policy. We granted Pebble Point's motion September 3, 2014, and ordered the parties to proceed to the appraisal process as provided in the Policy. See Dkt. 29 at 14.

         The Policy's Appraisal Provision provides the following:

If we and you disagree on the value of the property of the amount of “loss, ” either may make written demand for an appraisal of the “loss.” In this event, each party will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of “loss”. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally.
If there is an appraisal, we will still retain our right to deny the claim.

Dkt. 40-2 at 37. Pebble Point and Philadelphia Ins. each selected its own appraiser, Messrs. Lamont (Pebble Point) and Zwolfer (Philadelphia Ins.). Each party also filed a motion requesting the court to appoint an umpire and provided the court with the curriculum vitae of various persons the parties represented to be both neutral and competent. Dkts. 30, 31. On March 11, 2015, the court selected Mr. David J. Balistreri as the Umpire for the parties' appraisal. Dkt. 33.

         In March 2015, the Umpire requested that the parties' appraisers provide him with their estimates of the damages. The Umpire also scheduled the inspection of the apartment complex for Thursday, May 28, 2015. About one month prior to the inspection, on April 22, 2015, Pebble Point's appraiser emailed to the Umpire an engineering report dated April 15, 2015, which was prepared by Eduard Badiu of CEBB Engineering & Testing regarding Pebble Point's claimed losses.[2]

         As the date of the May 28th inspection approached, weather forecasts did not look promising, and given that the appraisers and the Umpire did not want to inspect the roofs at the complex in wet weather, they sought to reschedule the inspection for a date when adverse weather conditions would not interfere. A number of emails were exchanged among them to determine a better date; of those emails, however, some went between only the Umpire and the Philadelphia Ins. Appraiser. Indeed, the Pebble Point Appraiser discovered that he had been excluded from those communications only in a subsequent email that had been forwarded to him by the Umpire in which the Umpire informed both appraisers that he would decide on May 26, 2015 whether the inspection would go forward as scheduled on May 28, 2015.

         In the ten-day period leading up to the scheduled inspection, various emails were exchanged between the appraisers and the Umpire relating to the scope of information the Umpire would consider in making his decision. In the first email, dated May 19, 2015, the Umpire, after describing the information he had received from the appraisers, requested confirmation of the expected scope of information, including any expected testimony that the appraisers intended to offer at the inspection. This email states in relevant part:

Do I have all reports/documents you will be submitting for review? I believe I have adjuster reports (one from each side) and an engineer report from [Pebble Point's Appraiser]. Also - are there any persons other than yourselves who will provide testimony/opinions regarding this matter? If so please identify them. I do not accept last minute submission at the site. I hope to be able to settle this the day of our site visit but have allowed some time on Friday [May 29th] if additional paperwork is required.

Dkt. 39-1 at ΒΆ 5. Pebble Point's Appraiser responded that his engineer would be attending the site visit and ...

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